7 Powers: The Foundations of Business Strategy

by Hamilton Wright Helmer

Strategy: the study of the fundamental determinants of potential business value

As a strategist, then, my advice is, “Always look to the Barrier first.” In Intel’s case, the heart of its microprocessors strategy can be best understood not by sorting through the multiplicity of Intel’s value improvements, but by deducing why decades of capable and committed competition failed to emulate or undermine those improvements.

Switching Costs offer no Benefit if no additional related sales are made to the customer. To assure that such additional sales take place, one tactic might be to develop more and more add-on products. This has been SAP’s tack, as seen from this Wikipedia list of the company’s offerings.

Armed with one or more of these Power types, your business is ideally positioned to become a durable cash-generator, despite the best efforts of competitors. If you possess none of these, your business is at risk. Period.

But let me offer a first insight right here up front: all Power starts with invention.

At last Netflix had come face-to-face with Professor Porter’s uncomfortable truth: operational excellence is not strategy. Yes, operational excellence is essential and constantly challenging; it rightfully occupies the lion’s share of management’s time. Unfortunately, it does not by itself assure differential margins (a positive m in the Fundamental Equation of Strategy) combined with a steady or growing market share (s in the FES).